Mar 3, 2014

Is your organization ready for a paradigm shift?

In my previous post I touched on the origins of the first modern organization chart, and how today’s organizations can still learn from the principles behind a reorg that happened over 150 years ago. When we take a step back from the details and look at the story from a high level perspective, we see how a new technology, the telegraph in that case, introduced a paradigm shift in organizational design.

In order to effectively deal with what had been, essentially, the first appearance of big data (back in 1845!), the organization itself had to change the way it is organized and operates. Initially, forward thinking organizations like the New York and Erie Railroad seized this as an opportunity to grow and expand. Eventually, other companies would have to do a similar organizational changes in order to survive in the new information driven world.

In recent years we are witnessing significant changes in the way we work and communicate. There is a huge acceleration in technological innovation, which in turn leads to change in culture, work habits, legislation, as well as in individual and organizational behavior. Some of these changes represent revolutions that could, and possibly should, foundationally change the ways that organizations are structured and how information flows within them.

One challenge that managers and organizational development professionals face is recognizing which changes are passing fads, which are “more of the same”, and which changes actually warrant a paradigm shift in organizational design. A second challenge is timing - when should an organization make the change, since any significant change bears risks of its own.

I wanted to highlight several areas where technological advances and cultural change are already requiring organizations to adapt:

1) The sensitive aspects of Big Data

Big data is probably one of the most talked about trends in the business world, and so we will not dedicate too much time to it in the current discussion. Organizations are realizing the importance of collecting and mining the data that they have access to, and using it to make decisions across all levels of the organizations - from product decisions, to process optimizations and resource management, to HR and hiring practices, and more.

On the organizational level it has defined new roles such as the “Data Analyst” and an increasingly growing importance to the knowledge and information officers and the organizations they manage. While most of the big data trend has focused on extracting useful insights, there are several related aspects that are only now starting to come to the forefront. For example, there is a difference between data that is purely owned by the company, versus data that is owned by the company’s clients and partners.

In the past, the trend in big data was to save as much information as it possibly could, and then figure out what to do with it. But this can come at a great price. We have all read and seen the stories of companies and organizations being hacked and losing the data of millions of people (Yahoo, Target, and Kickstarter are just recent examples). Some of us were directly affected. Security and privacy leaks like this hurt the company both directly and indirectly, as well as hurt their customers and partners (banks now have to spend over $200M to reissue stolen credit cards due to that incident). The hack severely hurt Target’s customer trust and bottom line.

While many organizations already have security and privacy experts, not all of them have “baked” privacy, security, and legal considerations into their organizational fabric. As more organizations step into the world of big data, they also have the challenge of structuring themselves a way that these considerations are integrated into all phases of their product cycle and decision making. Part of the challenge is finding a way for these to be involved in a way that on one hand protects the organization, but on the other hand does not hinder innovation, or add excessive layers of bureaucracy, which in itself can hurt the organization’s culture. Getting it right might require new types of organizations and organizational flows that are different enough to warrant a paradigm shift.

2) Diffusion of organizational boundaries

Traditionally, organizational boundaries have been much clearer than they are today - you were either an employee and part of the organization, or you were not. There are two interesting trends that are contributing to the diffusion of the organizational boundaries: outsourcing and crowdsourcing.

In the past, organizations were self contained in the sense that the work was usually done in-house by the company’s employees, usually at the same physical environment. Today, many companies use outsourcing parts of their business and delegate work to other places where labor is cheaper or more experienced. Some tech startups entire engineering force is outsourced, while other companies outsource other services.

Crowdsourcing is an even more intriguing trend where internal tasks are given to the general public through match-making or competitive platforms. For example, Kaggle turns data analysis problems into competitions for data scientists. Topcoder similarly conducts competitions on more general programming problems, and Innocentive generalizes this approach to additional research and development areas like life sciences, chemistry, and more. Other companies rely on the general public as their PR/Marketing outreach with viral marketing campaigns, and so on.

Finally, another type of crowdsourcing is the open source movement. Increasingly, organizations put out open source projects that contribute to an external community of developers, but also return the company different benefits, like crowd-sourced bug detection and fixes. This also helps with training potential future employees in the tools and technologies that the company utilizes.

The contracting organization needs to define legal and contractual boundaries, with non disclosure clauses and the likes. However, there are additional considerations. In a way, the organization’s boundary is now much more fuzzy, or fluid. In some senses the organization is making the external companies or individuals part of their processes and flows. In other ways, it has very little influence or even visibility into what is happening outside its boundaries. How much does the organization know about the culture of an outsourcing firm, their internal values and processes? Is there anything they can do about the employee churn rate of contractor employees, or knowledge transfer for long term projects?

A way that organizations today resolve these challenges is to eventually attempt to hire successful contractors and contributors, and make them part of the traditional organization. However, a more exciting challenge might be to rethink the definition of the organization under the reality of diffused boundaries. How to manage long term relationships of this type, how to integrate them with the organizational processes and culture in ways that make sense. How to leverage the benefits of outsourcing and crowdsourcing, while also benefiting from the advantages of an explicit organization.

3) The way we communicate

Communication technologies are changing the way we interact at work, and also the ‘where’, ‘when’, and ‘how’ of the way we work.

Today we use social communication tools much more than in the past. Many companies provide their employees with internal social tools that in a way, flattens the organizational hierarchies. Every employee is “approachable” via that medium - via email directories, organizational groups and knowledge wikis, shared calendar systems, and more. Employees can easily contact the executives and vice versa without the need to schedule a formal meeting in a tight schedule, and without the need to “run into someone” at the hallway, which was the traditional way to interact with someone informally.

This direct accessibility is coupled with the fact that everyone can be reached at all times (24/7) due to the always-connected laptops, tablets and mobile phones, coupled with a an increasing acceptance of people being available during evenings, weekends, and even vacations (which has many drawbacks but is not part of our current topic).

Adding to that is the “flattening of the world” which allows companies to spread their offices across the globe in a very efficient way. For example, these allow a company to provide cost-effective 24/7 customer support by transitioning to different call centers around the world, each of them operating in the regular work hours of its time-zone. It also allows very small companies and startups to be distributed across locations and countries, something that only large corporations were able to do in the past.

These are just few examples of how today’s communication tools and norms are changing the flows of information within organizations. However, most organizations have not changed their organizational designs to match. How does the concept of a manager adapt to a reality where all employees are connected? What do team boundaries mean? How should processes be established in an organization that is constantly operating across many time-zones, how does one define a shift, or an end-of-day review? If we re-designed organizations from the ground up under today’s conditions - would they still look and operate as they do today, or will they be better served by different constructs?

These are just three areas that could lead to organizational restructure and change. They represent technological advances and behavior changes that are happening around us every day. Many times these changes creep slowly, first as some disruptive technology or behavior, and then one day you realize that everyone is doing it. It is sometime a good exercise to think whether our current organizational structures and practices still serve us well, or should we take a step back and update them. Innovative organizations will seize the opportunity to adapt and grow, and later set the pace for the rest of their industry.

What do you think? Could these areas lead to paradigm shift in organizational design? Are there other areas that would change the way organizations work in the future? What organizations and companies are forward thinkers in terms of their organizational change? What changes are they already implementing?